The End Of The Beginning

In November, 1942, British Prime Minister Winston Churchill made a speech in which he theorized that then recent events marked a turning point in Great Britain's death struggle with Nazi Germany. His words: "Now is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning."

Churchill's words seem to summarize how I feel about recent real estate information related to the much discussed "market collapse" that is creating so much financial and mental discomfort for everybody. I don't think we are at the end of the real estate correction. I don't think we are even at the beginning of the end of it. But perhaps, we are seeing the end of the beginning of it and can actually tell that the light at the end of the tunnel is not an oncoming train.

Everything I read from well-informed sources and all the figures I see from the Pinellas Realtor Organization and others, indicate to me that perhaps we in the Tampa Bay area are at the end of the beginning of this real estate cycle. We're still treading water, but the rescue might happen pretty quickly. Here's what I think we will see in the next 18 months or so ...

• I think residential prices will continue to fall for the rest of this year, but I believe the pace of the price declines will begin to slow soon. In the past year we have seen prices drop about 18 percent over the previous year. That kind of price adjustment can't continue much longer, any more than the double digit increases of 2004 and 2005 could have been sustained. I think prices are close to bottoming out, but still have a way to go before stabilizing. So if you've been holding your breath waiting for prices to drop, well, I think now you can start exhaling some of that air.
• As prices stabilize at lower levels, more and more buyers will come back into the marketplace. These buyers will make offers based on the then current market conditions, and sellers will be forced to accept these offers thus setting new and affordable market levels for housing.
• As residential prices become more affordable, the current inventories of unsold properties will be reduced through normal market activity. Pent-up buyer demand, however, will mean that these properties will be sold quite quickly. Once the buying starts in earnest, I think a lot of inventory will be sold in about a one year period starting in late 2008 or early 2009.
• Eventually the market will reach a level of equilibrium and there will be a five to six month inventory of unsold property on the market. It will not be a buyer's market or a seller's market, just a market in equilibrium with normal buying and selling activity similar in many ways to market conditions in the years before the "great run-up".

My crystal ball, which has been dark for so many months, tells me we will have a prolonged period of market equilibrium probably beginning about 2010. The ball tells me there will not be a V-shaped recovery as some analysts have predicted in which the market looses value quickly, hits bottom hard, and then rockets skyward almost immediately. Rather, the old ball predicts a recovery that will be more check mark-shaped in which the bottom of the market is reached fairly steeply (as we now see), then gives us a long period in which conditions remain fairly flat with a slow and gradual upturn in prices.

Of course, the old crystal ball comes with a few disclaimers in bold print. All these predictions assume that mortgage interest rates remain affordable and mortgage funds remain available. I think they will because certain safeguards have been enacted recently and it is to the advantage of mortgage bankers to continue to make mortgage loans -- after all, that's one of their primary sources of income.

The disclaimer also assumes that government somehow finds the ability to reduce its size and costs and to enact a simple, fair and equitable property tax system in Florida for all residents.

The disclaimer further assumes that the State of Florida can find some kind of justifiable and affordable method of offering windstorm insurance to property owners through the private sector rather than endangering the financial health of the entire state by public sector funding of this insurance.

Finally, the disclaimer assumes that recession fever doesn't last too long in the overall American economy. Simply put, people don't buy houses when there is a recession.

There you have it, some good news albeit tempered a bit with some long-standing problems that still remain worrisome. Like I said, it's the end of the beginning.

Given this kind of news, if I was a buyer I'd go house hunting right now while the selection is at its best and sellers are willing to negotiate. This may be the best time to buy in years.

For more information on real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.

-30-